AUGUSTA — Gov. Paul LePage is telling the Obama administration that Maine will consider participating in the Affordable Care Act’s Medicaid expansion if the federal government pays for affected recipients of the government-funded health insurance for 10 years.

The proposal, outlined in a letter Monday to U.S. Health and Human Services Secretary Kathleen Sebelius, is effectively LePage’s counter-proposal to the federal government, which hopes states will join the expansion effort under the health care law.

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LePage indicated last week that he is willing to consider Medicaid expansion, a departure from his previously stated opposition to the program.

In the letter to Sebelius, Maine Health and Human Services Commissioner Mary Mayhew wrote that the state has been penalized for voluntarily expanding Medicaid eligibility in 2003. She said that because federal reimbursement rates for some Medicaid recipients have since decreased, other states are getting a better deal for participating in the expansion than Maine would.

Medicaid expansion will be fully funded by the federal government from 2014 through 2016. Federal funding will cover 90 percent of the program after that, although skeptics note that the post-2016 reimbursement could decrease.

The state is projected to spend $776 million on MaineCare, its version of Medicaid, in the fiscal year ending June 30. That’s 25 percent of its overall budget. Counting federal money, nearly $2.4 billion will be spent on MaineCare this year.

The Medicaid expansion would make 55,000 more low-income people eligible for MaineCare, according to an analysis by the Kaiser Family Health Foundation.

Those people would be “able-bodied” parents, and adults who have no children and earn as much as 133 percent of the federal poverty level — just over $20,500 a year for a two-person household.

Mayhew said Maine has already expanded eligibility to cover some of that population, but the federal government has reduced the reimbursement rate, contributing to Maine’s frequent budget problems.

“While some argue the state cannot afford to turn down the expansion of Medicaid, the simple truth is that by accepting a lower rate of federal funding than other states are being offered, Maine would continue down an unsustainable and unaffordable path,” Mayhew wrote. “For the expansion of Medicaid to be a viable option to consider, we would need for this penalty to be lifted, creating parity between Maine and the non-expansion states with regards to the federal match rate.”

She said that if the federal government funds 100 percent of the state’s Medicaid costs for Mainers covered by the expansion for 10 years, “we can put our Medicaid program on a track to succeed in the long term.”

Democratic leaders had a tepid response to the proposal. Senate President Justin Alfond, D-Portland, and House Speaker Mark Eves, D-North Berwick, said full reimbursement for 10 years is unrealistic.

But both said they are glad that the governor is discussing expansion with the Obama administration.

“It’s encouraging that the governor is looking at accepting federal funds,” Alfond said. “Doing this is good for the state’s economy, it’s morally the right thing to do and it’s good for our health care system.”

Alfond said 100 percent reimbursement “seems to be an unrealistic request. No other state in the country has gotten a deal like this. I hope this has not created a false starting point.”

Mayhew said the state would also need greater flexibility to manage its Medicaid program, which she said needs an overhaul.

“We would need to provide for our current populations under a more flexible structure, like a global waiver. This would provide us with the independence that is necessary to make holistic changes to our Medicaid program that would best serve Medicaid populations,” Mayhew wrote.

Mayhew’s reference to a “global waiver” could become a point of contention.

The federal government typically mandates specific Medicaid coverage criteria in exchange for providing funding to states. States can petition the government for waivers that give them more discretion to manage their Medicaid programs.

A global waiver can be more expansive than a traditional waiver. Several states have requested global waivers, including New Jersey, Vermont and Rhode Island.

Rhode Island’s waiver, granted in the final weeks of the Bush administration in 2009, has been championed by conservative organizations, including the Heritage Foundation, for achieving savings in the state’s Medicaid budget.

Rhode Island’s global waiver is sometimes compared to a Medicaid block grant that essentially allows states to take federal dollars and manage their Medicaid programs and cap spending.

Skeptics have challenged the purported savings, arguing that Rhode Island has spent less on Medicaid because of increased federal reimbursement rates and additional dollars from the American Recovery and Reinvestment Act.

Mayhew declined to provide specifics Wednesday about the administration’s vision for a global waiver. But she said the state needs greater flexibility to better manage its Medicaid recipients and associated costs.

In her letter to Sebelius, Mayhew wrote that the state “must reinvent our Medicaid program through innovations that ensure a patient-centered approach and hold providers and payers accountable for quality outcomes.”

In a telephone interview, Mayhew cited the fact that Medicaid funding can’t be used for home-based care for some elderly people.

The result, she said, is a “perverse incentive” to push patients into nursing homes, a more expensive service, but one that Medicaid covers.

The state could apply for a narrow waiver to change that scenario, but Mayhew said that process could take years.

She said she is convinced that the Obama administration is “interested in exploring any and all options” and “good-faith negotiations” that will lead states to participate in Medicaid expansion.

The state recently won a $33 million Medicaid innovation grant from the federal government, a fact that Mayhew cited in her letter to Sebelius.

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